LONDON, Nov 30 Philip Morris International
, the world's largest international tobacco company, said
it could eventually stub out cigarette sales as it launched an
alternative product in Britain on Wednesday.

Underlining the regulatory pressures facing the tobacco
industry, a British court also on Wednesday rejected an appeal
against new rules prohibiting the use of marketing such as logos
or colours on cigarette packs.

The British government's victory could spur other countries
to follow suit, highlighting the need for tobacco companies to
develop alternatives to cigarettes to respond to health concerns
that are leading more people to quit a habit responsible for an
estimated 6 million deaths a year.

Executives from Philip Morris, which sells Marlboros
everywhere except the United States, said their ultimate goal
was to phase out cigarettes.

"We certainly see a future where Philip Morris no longer
will be selling cigarettes in the market," Martin Inkster,
managing director of Philip Morris UK and Ireland, told Reuters.

He said that would take many years and require the help of
governments and regulators. Philip Morris still produces more
than 870 billion cigarettes each year.

Philip Morris, along with British American Tobacco,
Japan Tobacco International and Imperial Brands
, mounted a legal challenge to Britain's plain packaging
law that was shot down by a High Court in May.

Philip Morris did not join in the appeal brought by the
other three, saying it preferred to focus on lower-risk products
such as IQOS. It has not explained the origin of the name, but
some observers have dubbed it "I Quit Ordinary Smoking".

NEW ALTERNATIVES TO CIGARETTES

The company said IQOS, the result of a decade of research
and $3 billion of investment, was a step toward a smokeless
future.

The device, already on sale in over a dozen markets
including Japan, Switzerland and Italy, electronically heats
tobacco enough to produce a vapour without burning it. The
company says the vapour has less than 10 percent of the amount
of harmful chemicals found in cigarette smoke.

It plans to have IQOS in 20 markets by the end of this year,
and as many as 35 by the end of next year. In the UK, it will
cost 45 pounds ($56.14), with a single pack of 20 tobacco
sticks, called HEETS, costing 8 pounds ($9.98).

The UK is poised to be a big test for IQOS, since its
e-cigarette market is more developed than several of IQOS's
other markets.

Japan Tobacco and BAT are testing their own
tobacco-based products and are pushing hard to catch up to
Philip Morris in delivering products that fill the space where
the current generation of e-cigarettes -- which use
nicotine-laced liquid -- fail.

BAT, which is in talks to buy Reynolds American for
more than $47 billion, has spent about $700 million over the
past five years to develop next-generation products.

Its line-up is more diverse than those of its peers,
including the "glo" tobacco device, various Vype e-cigarettes
and an inhaler called Voke certified as a medical product.

"Different segments of consumers will prefer different
products," David O'Reilly, BAT's group scientific and R&D
director, told Reuters earlier this month. "That's why we have a
multi-category approach."

With e-cigarettes he said nicotine is not immediately
absorbed by the lungs as it is with smoking, so the chemical
satisfaction is delayed. But "heat not burn" products deliver a
quicker and more authentic hit.

PMI and BAT both have various other products in development.

PMI is working on a tobacco stick that uses a carbon tip as
a heat source to generate vapour, in a product that is even
closer to a traditional cigarette as the whole thing can be
thrown away after use. That technology is similar to one owned
by Reynolds, which BAT would acquire if its planned acquisition
goes through. BAT is also working on technology whereby an
e-cigarette could deliver an immediate nicotine hit, like
tobacco, that smokers may find more satisfying.

Imperial Brands, the fourth-largest tobacco company,
has so far stuck with e-cigarettes, which are also widely sold
by independent start-ups.

Health campaigners remained cautious.

"If smokers switch to electronic cigarettes or other
products that can be shown to cut the risks to their health,
this could lead to a big improvement in public health," said
Deborah Arnott, chief executive of UK health charity Action on
Smoking and Health (ASH).

"But we need independent evidence to support any claims made
by the tobacco industry."

ASH said that until independent evidence shows that IQOS and
similar products are substantially less harmful than smoking,
they should be regulated in the same way as cigarettes.
($1 = 0.8016 pounds)
(Reporting by Martinne Geller in London; Editing by Keith Weir
and Alexandra Hudson)

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